Friday, January 14, 2011

The deregulators have learned NOTHING

There are three sure tip-offs that you are probably in a room with a complete fool:  The sound of mouth-breathing and drooling, the sound of knuckles dragging along the floor, and the assertion that economic deregulation will lead to greater prosperity for all.

There is a REASON why regulated capitalism ALWAYS outperforms the deregulated version--good rules allow the honest, innovative entrepreneur to thrive while a lack of rules and enforcement means that the most vicious of crooks will triumph.  Honest business people will always outperform crooks and cheats when it comes to building a real economy.  ALWAYS!

So now we have the evidence of this truth staring us in the face.  After 35 years of preaching the virtues of deregulation, the global economy is teetering on the brink of utter collapse.  But has that stopped the deregulators from sermonizing?  Are you kidding?  They are back in power in the USA House and virtually every economic commentator that gets to spew for a television audience sings from the same old deregulation songbook.

There are, thankfully, a few economic thinkers who understand.  Black is one of them.
The Anti-Regulators Are the "Job Killers"
William K. Black
Assoc. Professor, Univ. of Missouri, Kansas City; Sr. regulator during S&L debacle
Posted: January 14, 2011 09:13 AM
The new mantra of the Republican Party is the old mantra -- regulation is a "job killer." It is certainly possible to have regulations kill jobs, and when I was a financial regulator I was a leader in cutting away many dumb requirements. We have just experienced the epic ability of the anti-regulators to kill well over ten million jobs. Why then is there not a single word from the new House leadership about investigations to determine how the anti-regulators did their damage? Why is there no plan to investigate the fields in which inadequate regulation most endangers jobs? While we're at it, why not investigate the areas in which inadequate regulation allows firms to maim and kill. This column addresses only financial regulation.
Deregulation, desupervision, and de facto decriminalization (the three "des") created the criminogenic environment that drove the modern U.S. financial crises. The three "des" were essential to create the epidemics of accounting control fraud that hyper-inflated the bubble that triggered the Great Recession. "Job killing" is a combination of two factors -- increased job losses and decreased job creation. I'll focus solely on private sector jobs -- but the recession has also been devastating in terms of the loss of state and local governmental jobs.
From 1996-2000, for example, annual private sector gross job increases rose from roughly 14 million to 16 million while annual private sector gross job losses increased from 12 to 13 million. The annual net job increases in those years, therefore, rose from two million to three million. Over that five year period, the net increase in private sector jobs was over 10 million. One common rule of thumb is that the economy needs to produce an annual net increase of about 1.5 million jobs to employ new entrants to our workforce, so the growth rate in this era was large enough to make the unemployment and poverty rates fall significantly.
The Great Recession (which officially began in the third quarter of 2007) shows why the anti-regulators are the premier job killers in America. Annual private sector gross job losses rose from roughly 12.5 to a peak of 16 million and gross private sector job gains fell from approximately 13 to 10 million. As late as March 2010, after the official end of the Great Recession, the annualized net job loss in the private sector was approximately three million (that job loss has now turned around, but the increases are far too small). more

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